Google Guidelines on Exchanging Links

Google search ranking is based on quality of sites making inbound links
- Relevance, quality, quantity

Link schemes

Problems can include

Do only what is beneficial for your page's visitors.

Is this policy fair?

How can google tell the difference between genuine two-way link ,ad reciproxal link?
- By relevance?
How do I know if someone is a web spammer, or a bad neighborhood before I link to them?

Possible example problems:

A site that asks to exchange links with other sites on the same product, but then just swapping links with anyone.

Interesting and useful sites will automatically get linked to
Submit site to major directories
Submit articles
Help in forums that allow text link (although many use nofollow, so keep a list of those you find that don't. Then again, even nofollow links will still generate some clickthroughs from visitors to the source page.)
Write ebooks that link to your site
Simple web based software, and telling ezines etc about it
Blog, and get the blog listed in blog directories
Affiliate programs are good for links
Social linking: digg, delicious, stumbleupon
Professional associations
Create links from wikis to your site

Yahoo gives better link:example.com links than Google.

Sources